SE1 SB23: Bill Text

LRB-3044/1

JK&GMM:jld:rs

September 2011 Special Session

2011 - 2012 LEGISLATURE

Senate BILL 23

October 18, 2011 - Introduced by Committee on Senate Organization, by request of Governor Scott Walker, Senator Zipperer, and Representative Strachota. Referred to Committee on Public Health, Human Services, and Revenue.

SB23,2,2 An Act to amend 71.09 (11) (d), 71.78 (1m) (a), 71.83 (1) (a) 1., 71.83 (1) (a) 1m., 71.83 (1) (a) 2., 71.83 (1) (a) 3., 71.83 (1) (a) 4., 71.83 (3) (a), 72.06, 73.01 (4) (e) 2., 76.05 (2), 76.14, 76.28 (6) (b), 76.39 (3), 76.645 (2) (intro.), 77.60 (2) (intro.), 77.60 (3), 77.60 (4), 77.61 (5) (a), 77.76 (3), 77.76 (3m), 77.76 (3p), 77.95, 77.982 (2), 77.982 (3), 77.991 (2), 77.9941 (5), 77.9951 (2), 77.9964 (2), 77.9972 (2), 78.68 (3), 78.68 (4), 139.11 (4) (a), 139.25 (3), 139.25 (4), 139.38 (6), 139.82 (6), 227.12 (3), 227.41 (1), 227.41 (3), 227.41 (4), 227.483 (1) and 803.08; and to create 73.015 (3), 73.16, 77.61 (6), 125.52 (8), 125.53 (3), 125.58 (5), 227.12 (4) and 227.41 (5) of the statutes; relating to: various duties of the Department of Revenue, including issuing declaratory judgments, conducting audits and assessments, asserting liability, allowing claims for refunds, awarding the costs of litigation, prohibiting browsing of returns and claims, imposing penalties related to a taxpayer's negligence, requiring the exercise of rule-making authority, and providing a penalty.

Analysis by the Legislative Reference Bureau

This bill requires the Department of Revenue (DOR) to take certain actions related to administering taxes and fees. Under the bill, generally, with regard to any audit, assessment, or claim for a refund, DOR may not take a position that is contrary to any rule promulgated by DOR that was in effect during the period related to the audit, assessment, or claim or that is contrary to any guidance published by DOR prior to that period and not subsequently retracted, altered, or amended.

Under the bill, generally, a person who is subject to an assessment or audit determination by DOR is not liable for any amount that DOR asserts that the person owes if the liability asserted is the result of a tax issue that existed in a prior assessment or audit, a DOR employee involved in the prior assessment or audit knew of the tax issue, and DOR did not assert the liability for the tax issue at the time of the prior assessment or audit. This provision, however, does not cover the treatment of tax issues that were not specifically addressed in the prior assessment or audit determination by DOR.

Under the bill, DOR may not impose a penalty on a taxpayer for negligence or for otherwise filing an improper return unless the the taxpayer's action was due to the taxpayer's willful neglect and not to reasonable cause.

The bill prohibits class action lawsuits against the state or any other party if the relief sought by the plaintiff includes the refund of any tax administered by the state.

Under current law, DOR may choose not to appeal a ruling by the Tax Appeals Commission (commission) and, instead, file a notice of nonacquiescence with the clerk of the commission. The effect of filing the notice is that, although the commission's decision is binding on the parties involved in the ruling, the commission's legal reasoning is not binding on DOR with regard to future cases. Under the bill, although DOR may file a notice of nonacquiescence and, therefore, not be required to follow the commission's legal reasoning, the parties involved in the ruling are bound by the commission's decision and the decision may be cited by the commission and the courts in future cases.

Under current law, a person may file a petition with a state agency to issue a declaratory ruling with respect to how a statute or rule applies to any person, property, or set of facts. The agency must, within a reasonable time after receiving the petition, either deny the petition for failure to complete a proper petition or schedule a hearing for the matter described in the petition. Under the bill, if a person files a petition with DOR to issue a declaratory ruling, DOR must deny the petition, issue a notice that it will issue a ruling on the facts contained in the petition, or schedule a hearing for the matter described in the petition no later than 30 days after receiving the petition. If DOR does not deny the petition and does not issue a notice, DOR must hold a hearing and determine, no later than 180 days after it receives the petition, whether the person submitting the petition has presented sufficient facts from which to issue a declaratory ruling. If DOR determines that it has sufficient facts from which to issue a declaratory ruling, DOR must issue a ruling on the merits of the petition no later than 180 days after that determination, unless the deadline for issuing the ruling is extended by written agreement with all parties involved.

Under current law, certain persons may file a petition with a state agency to have the agency promulgate a rule. In order to promulgate the rule, the agency must first prepare a statement of the scope of the proposed rule and submit the statement to the governor for the governor's approval. In addition, the agency must submit the proposed rule in final draft form to the governor for approval before the rule is published and submitted to the legislature for review.

Under this bill, if a petition filed with DOR alleges that DOR has established a standard by which it construes a tax statute, but has not promulgated a rule to adopt the standard, DOR must submit a statement of the scope of the proposed rule to the governor no later than 90 days after receiving the petition. No later than 270 days after the statement is approved by the governor, DOR must submit the proposed rule in final draft form to the governor for the governor's approval. The rule does not have to adhere to the standard established by DOR, but must address the same circumstances as the standard addresses.

Under current law, no person, other than the person who filed the return or claim, may inspect an income or franchise tax return or claim, unless that person is doing so in performing the duties of his or her position. Under this bill, no person, other the person who filed the return or claim, may inspect an income or franchise tax return or claim, or any information derived from the return or claim, unless that person is doing so in performing the duties of his or her position. In addition, under the bill, the same prohibition applies to other tax returns and claims, including sales and use tax returns and claims, estate tax returns and claims, and cigarette tax returns and claims.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB23, s. 1 Section 1. 71.09 (11) (d) of the statutes is amended to read:

SB23,3,6 71.09 (11) (d) The secretary of revenue determines that the taxpayer retired during the taxable year or during the preceding taxable year after having attained age 62 or becoming disabled and that the underpayment was due to reasonable cause and not due to willful neglect except that this paragraph does not apply upon a showing by the department under s. 73.16 (4).

SB23, s. 2 Section 2. 71.78 (1m) (a) of the statutes is amended to read:

SB23,4,6 71.78 (1m) (a) No person, except the person who filed the return or claim, may inspect a return or claim, or any information derived from a return or claim, that is filed under this chapter unless that person does so in performing the duties of his or her position. Violation of this paragraph by a state employee is grounds for dismissal.

SB23, s. 3 Section 3. 71.83 (1) (a) 1. of the statutes is amended to read:

SB23,4,19 71.83 (1) (a) 1. `Failure to file.' In case of failure to file any return required under s. 71.03, 71.24, 71.44, or 71.775 on the due date prescribed therefor, including any applicable extension of time for filing, unless it is shown that the failure is due to reasonable cause and not due to willful neglect and upon a showing by the department under s. 73.16 (4), there shall be added to the amount required to be shown as tax on the return 5% of the amount of the tax if the failure is for not more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate. For purposes of this subdivision, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the due date prescribed for payment and by the amount of any credit against the tax which may be claimed upon the return.

SB23, s. 4 Section 4. 71.83 (1) (a) 1m. of the statutes is amended to read:

SB23,5,2 71.83 (1) (a) 1m. `Failure to file information return.' If a person fails to file a return required under subch. XI by the prescribed due date, including any extension, or files an incorrect or incomplete return, that person may be subject to a penalty of $10 for each violation. A penalty shall be waived if the person shows that a violation is due to reasonable cause and not due to willful neglect except upon a showing by the department under s. 73.16 (4).

SB23, s. 5 Section 5. 71.83 (1) (a) 2. of the statutes is amended to read:

SB23,5,16 71.83 (1) (a) 2. `Incomplete or incorrect return.' If any person required under this chapter to file an income or franchise tax return files an incomplete or incorrect return, unless it is shown that such filing was due to good cause and not due to neglect and upon a showing by the department under s. 73.16 (4), there shall be added to such person's tax for the taxable year 25% of the amount otherwise payable on any income subsequently discovered or reported. The amount so added shall be assessed, levied and collected in the same manner as additional normal income or franchise taxes, and shall be in addition to any other penalties imposed by this chapter. In this subdivision, "return" includes a separate return filed by a spouse with respect to a taxable year for which a joint return is filed under s. 71.03 (2) (g) to (L) after the filing of that separate return, and a joint return filed by the spouses with respect to a taxable year for which a separate return is filed under s. 71.03 (2) (m) after the filing of that joint return.

SB23, s. 6 Section 6. 71.83 (1) (a) 3. of the statutes is amended to read:

SB23,6,5 71.83 (1) (a) 3. `Incomplete or incorrect deposit or withholding report.' If any person required under subch. X to file a deposit report or withholding report files an incomplete or incorrect report, or fails to properly withhold or fails to properly deposit or pay over withheld funds, unless it can be shown that the filing or failure was due to good cause and not due to neglect and upon a showing by the department under s. 73.16 (4), there shall be added to the tax 25% of the amount not reported or not withheld, deposited or paid over. The amount so added shall be assessed, levied and collected in the same manner as additional income or franchise taxes, and shall be in addition to any other penalties imposed in this subchapter. "Person", in this subdivision, includes an officer or employee of a corporation or other responsible person or a member or employee of a partnership or limited liability company or other responsible person who, as such officer, employee, member or other responsible person, is under a duty to perform the act in respect to which the violation occurs.

SB23, s. 7 Section 7. 71.83 (1) (a) 4. of the statutes is amended to read:

SB23,6,14 71.83 (1) (a) 4. `Late filing of withholding report.' In case of failure to file any withholding deposit or payment report required under s. 71.65 (3) on the due date prescribed therefor, unless it is shown that the failure is due to reasonable cause and not due to willful neglect upon a showing by the department under s. 73.16 (4), there shall be added to the amount required to be shown as withheld taxes on the report 5% of the amount if the failure is not for more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate.

SB23, s. 8 Section 8. 71.83 (3) (a) of the statutes is amended to read:

SB23,7,5 71.83 (3) (a) If any person required under this chapter to file an income or franchise tax return fails to file a return within the time prescribed by law, or as extended under s. 71.03 (7), 71.24 (7) or 71.44 (3), unless the return is filed under such an extension but the person fails to file a copy of the extension that is granted by or requested of the internal revenue service, the department shall add $50 to the person's tax if the return is filed under subch. I of this chapter or $150 to the person's tax if the return is filed under subch. IV or VII of this chapter. If no tax is assessed against any such person the amount of this fee shall be collected as income or franchise taxes are collected. If any person who is required under s. 71.65 (3) to file a withholding report and deposit withheld taxes fails timely to do so and upon a showing by the department under s. 73.16 (4); unless the person so required dies or the failure is due to a reasonable cause and not due to neglect; the department of revenue shall add $50 to the amount due except that if the person is subject to taxation under subch. IV or VII of this chapter the department shall add $150 to the amount due.

SB23, s. 9 Section 9. 72.06 of the statutes is amended to read:

SB23,7,10 72.06 Confidentiality of tax returns. Sections 71.78 (1), (1m), and (4) to (9) and 71.83 (2) (a) 3. and 3m. apply to any information obtained from any person by the department on a death tax return, report, schedule, exhibit or other document or from an audit report pertaining to the tax return.

SB23, s. 10 Section 10. 73.01 (4) (e) 2. of the statutes is amended to read:

SB23,7,22 73.01 (4) (e) 2. Except for hearings on ss. 341.405 and 341.45, the department of revenue may choose not to appeal and to nonacquiesce in the decision or order by sending a notice of nonacquiescence to the clerk of the commission, to the legislative reference bureau for publication in the Wisconsin administrative register and to the taxpayer or the taxpayer's representative before the time expires for seeking a review of the decision or order under s. 73.015. The effect of this action is that, although the decision or order is binding on the parties for the instant case and the decision or order may be cited by the commission and the courts, the commission's conclusions of law, the rationale and construction of statutes in the instant case are not binding upon or required to be followed by the department of revenue in other cases.

SB23, s. 11 Section 11. 73.015 (3) of the statutes is created to read:

SB23,8,3 73.015 (3) Except for decisions and orders in small claims matters, as defined in s. 73.01 (1) (b), a conclusion of law or other holding in any decision or order of the tax appeals commission may be cited by the commission or the courts as authority unless that conclusion of law or holding has been reversed, overruled, or vacated on the merits on appeal or by a subsequent decision or order of the commission.

SB23, s. 12 Section 12. 73.16 of the statutes is created to read:

SB23,8,5 73.16 General provision. (1) Definitions. In this section:

SB23,8,6 (a) "Commonly controlled group" has the meaning given in s. 71.255 (1) (c).

SB23,8,7 (b) "Department" means the department of revenue.

SB23,8,10 (c) "Person who is a party to the determination" means a person who requests a determination for that person's benefit, files a claim for a refund, or is assessed by the department, but not including any of the following:

SB23,8,12 1. A person who, on behalf of another person, requests a determination or a claim for a refund or appeals a determination.

SB23,8,15 2. A shareholder of a tax-option corporation, a member of a limited liability company, or a partner of a partnership, unless such an individual is named or identified in the determination, claim for a refund, or assessment.

SB23,8,16 3. An anonymous person who requests a determination.

SB23,8,18 (d) "Published" means prepared and issued for public distribution and does not include guidance on a private matter or issue.